Gold: The Place to Be

By Richard Russell, For The Gold Report October 15, 2004 www.theaureport.com

News: Betting odds on Bush continue to drop. Tradesport at 54% for Bush, Iowa Electronic shows Bush at 49.8% and Kerry at 50.0% - the first time Kerry is in the lead.

The U.S. trade deficit in August widened to $54 billion, the second largest deficit on record.

Mortgage applications dropped 9.2% last week. Refinancing applications fell 14.2%, the first drop since last August. Loan requests for buying a home slide 4.9%, the lowest level since late-June.

Meanwhile, home building stocks continue their slide, a slide that began in late-September...

Does the Dow Theory still work? You be the judge. I warned week after week that the divergence and series of non-confirmations on the part of the D-J Industrial Average constituted a red flag for investors. I stated that it was an indication that important distribution was taking place. I warned that we were seeing the most extended and the most flagrant period of divergency and non-confirmations in Wall Street history. For some strange reason nobody else seemed to be impressed. Once again, I was alone.

Over the same period, I received e-mails telling me that the Transports were antiques, that the confirmation principle was no longer valid, that the Dow Theory was a relic, that the Dow stocks were not representative of the U.S. economy - you name it, I received it. I was even sent articles from various market experts who explained why the Transports were actually the "leading average," and if the Transports continue higher, why that was bullish.

Fortunately, I've been through all this before. Many times. And yes, properly interpreted, the Dow Theory does work. In fact, it's working now. The extended period of divergence and non-confirmations was telling U.S. that stocks were being distributed, that the danger signals were flying, that the Dow Theory was telling U.S. in every way it could that the situation was growing increasingly dangerous.

So yes, that's what I told subscribers. And that's what I'm telling subscribers now. The place to be is in cash and gold and gold shares. That is my stance. . . Sure you can have a few utility stocks. Sure you can own a few defense stocks. But the bulk of your assets should be in cash, gold and gold shares.

"In a primary bear market everyone loses, and the winner is the one who loses the least."

The Dow opened down 17 today - below the important 10000 level. At a value of 10000, the Dow would be down 80 points for the month of October. This would take the Dow down past 0.50% for the month. In the past 100 years, no presidential incumbent has remained in office when the Dow was down 0.50% or more for the month prior to election time. In other words, a Dow below 10000 at this month's end would be a negative omen for President Bush. So yes, the big battle is underway. Polls are polls, but the real crystal ball may belong to Wall Street. (October 14, 2004)

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